Yen on intervention watch as Japan wary of 'disorderly and speculative moves'
Business
It is currently traded for 151.35 against dollar
- BOJ Governor says currency moves are among factors that have a big impact on the economy and prices
SINGAPORE/TOKYO (Reuters/Web Desk) - The Japanese yen languished near its weakest in decades on Thursday though the threat of intervention from Japanese authorities kept investors leery of pushing the currency to a new low.
The heightened market focus was on the yen, which was last little changed at 151.35 per US dollar [03:53GMT], having slid to a 34-year low of 151.975 in the previous session.
Japan's three main monetary authorities held an emergency meeting on Wednesday to discuss the weak yen, and suggested they were ready to intervene in the market to stop what they described as disorderly and speculative moves in the currency.
That came after officials ramped up verbal warnings to stem the yen's fall, with Finance Minister Shunichi Suzuki saying "decisive steps" will be taken against excessive currency moves.
Japanese authorities last intervened to support the yen in 2022, when they also used phrases such as "deeply concerned" and pledged to take "decisive steps" prior to intervention.
"Contrary to popular belief of 152 as the line in the sand, I think it's more of the magnitude of the move that may matter," said Christopher Wong, a currency strategist at OCBC.
"There is also a limit to how far verbal intervention can go. Nonetheless, the actual intervention risk is still high, if not higher."
The sliding yen has been a boon for Japan's Nikkei, which is up about 3 per cent for the month thus far. It was last 1pc lower, but remained not far from a record high.
DOLLAR POWER
The US dollar was on the front foot, helped in part by comments from Fed Governor Christopher Waller, who said late on Wednesday there is no rush to ease interest rates.
While a more than 50% chance of a first Fed cut in June continues to be priced in, traders are placing greater bets for similar moves by the European Central Bank and the Bank of England that month.
Sweden's central bank on Wednesday signalled there was a good chance of a series of rate cuts starting in May if inflation continued to drop towards its 2pc target.
Against the greenback, the euro fell 0.1pc to $1.0816, and sterling eased 0.12pc to $1.26255.
The New Zealand dollar fell to its weakest level in four months at $0.5981.
"(The dollar) is still being swayed by the relative hawkishness of the Fed, taking all 19 policymakers together, and other central banks, who have tilted even more toward dovish in their tone recently," said Thierry Wizman, global FX and rates strategist at Macquarie.
The renewed dollar strength halted a blistering rally in gold that sent it to a record peak last week. The yellow metal eased 0.2pc to $2,189.81 an ounce.
WHAT DID THEY SAY ON WEDNESDAY?
In a sign of growing urgency to put a floor under the yen after the currency fell to a 34-year low against the dollar, the Bank of Japan, the Finance Ministry and Japan's Financial Services Agency held a meeting late in Tokyo trading hours.
In a briefing afterwards, top currency diplomat Masato Kanda said he "won't rule out any steps to respond to disorderly FX moves". Kanda also said the BOJ would respond through monetary policy if currency moves affected the economy and price trends.
A weaker yen makes exports from the world's fourth-largest economy cheaper, but pushes up energy prices and other Japanese imports, fuelling inflation and making the cost of living higher.
That undermines the BOJ's objective of achieving a sustainable 2pc inflation level via wage growth and better household purchasing power, rather than cost-push inflation.
DOMINO EFFECT
Bank of Japan Governor Kazuo Ueda said on Wednesday that the central bank would also keep a close eye on currency developments.
"Currency moves are among factors that have a big impact on the economy and prices," Ueda told parliament, when asked about the yen's recent sharp declines.
National Australia Bank forex strategists said ripples from the yen's decline were being felt elsewhere and said that a recent sharp drop in China's yuan may be a policy response to protect the competitiveness of Chinese exports.
"It's not just a yen story. It has a domino effect that causes downside risk to other currencies," said NAB strategist Rodrigo Catril.
While the BOJ raised interest rates for the first time since 2007 last week, markets now believe the next hike may be some time away.
That has reinforced the yen's use in carry trades, in which investors borrow in a currency with low interest rates and invest the proceeds in a higher-yielding currency. Japanese investors can also get much stronger returns abroad, depriving the yen of support from repatriation flows.
For the current quarter that ends later this week, the yen is the worst-performing major currency, down more than 7pc on the dollar.
